Finance Videos

Jun 7, 2017 | 01:31

Santander rescues Banco Popular from collapse

Spain's biggest bank Santander has announced that it will buy struggling rival Banco Popular for a nominal one euro after European authorities determined the lender was on the verge of insolvency. As Sara Hemrajani reports, Santander will carry out a capital increase of around 7 billion euros to cover the capital and provisions required to boost Popular's finances.

TRANSCRIPT +

Rescued from the brink of collapse.
Banco Popular has found a saviour in the form of Santander.
Spain's biggest bank is buying its struggling rival for the sum of 1 euro.
And there'll be no cost to the taxpayer as Santander plans to raise 7 billion euros of new capital to fund the deal.
(SOUNDBITE) (Spanish) BANK SANTANDER CHAIRWOMAN, ANA BOTIN, SAYING:
"It's an operation that is good for Spain and good for Europe. It's the first time it's been executed within the framework of the European resolution which guarantees that if a bank must be rescued the system continues to be stable and a solution is reached without public aid."
The ECB had warned that Popular was on the verge of insolvency.
Its books are weighed down by billions of euros worth of toxic real estate loans left over from Spain's financial crisis.
But so far the reaction to the takeover has been positive.
SOUNDBITE: Peter Dixon, Global Financial Economist, Commerzbank, saying (English):
"Santander is sufficiently large to accommodate a large chunk of the debt which it's taking on. It also gets access to Popular's very strong SME franchise. So whilst there are risks, I think the market's pretty confident that this can be reasonably well digested."
Santander says it's aiming to sell off at least half of Popular's real estate assets in the next year and a half.
That would help accelerate growth and profit from 2019.

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